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India, Print Money and Be Happy. Not really

There are so many basic but crucial things about daily economics which we ignore or know it partially. Had a Diwali get together and one of the cousin asked – “Why can’t Indian goverment print money and give it to all poor people”

And then everyone started responding:
1) it is limited by how much gold you have
2) you have to take permission from Internation bank
and many more points came in to discussion.

I later went on internet to find out “How exactly a country decide how much Money to Print”

Here are few interesting things I discovered:

-India can print as much money as we want. There is no need to have any gold to back Indian Rupee

-Remember 2008 recession, almost all country came out with Stimulus Packages. That is nothing else but Printing more money. Yes! Indian government also printed lot of money before 2009 election to save its position

-Open a newspaper and you will find atleast one piece on inflation. Onion price, vegetables, Milk, Steel etc Everything is costlier then it was few years back.

-People tend to spend more if there is more money. Let’s say some of the top Politicians decide to bring back all their money from Swiss banks and give 1 Cr to everyone in Mumbai. You will find people change in people’s spending habit. If you use to take Taxi once in a week, now you will take Taxi 3 times in a week. If you were using AC for 1 hour in night, now you will use it for 4 hours. Hence demands for Energy and all commodities go up. Prices go up.

-Hence Printing Money is not a solution to remove poverty. Right way is to become more competitive – provide better service – produce cheaper goods and increase exports.

-If you can buy Food for 10 rupees instead of 50 rupees, you will save money and use it to invest in business. Grow rich.

-If we simply Print money and give it to people – everyone will just end up driving the price. Doesn’t help anyone.

-Between, heres an eye-opening statement. Planet Earth uses US dollar as International currency. Our Diamond market uses it too. However since 2005, Federal Reserve Bank of USA(like RBI of India) has stopped disclosing how much dollar they are printing every year. Isn’t that scary?